The Evolving International Cannabis Landscape

The evolving landscape of the non-U.S. cannabis industry mirrors the early growth stages seen in the United States, which we outlined in our preceding article in this series. As recreational cannabis markets emerge, the consumer base expands from daily enthusiasts, who might even cultivate their own cannabis, to a wider demographic. In the U.S., younger individuals from diverse backgrounds are choosing cannabis over alcohol for a fun Saturday night, while older demographics are discovering its benefits for pain relief and the management of various health conditions.

These trends in market maturity indicate what might be expected in regions such as Europe, Latin America, Africa, Oceania, and Asia over the next decade. Governments play a crucial role as gatekeepers in this development, and regulatory reforms toward cannabis access vary significantly across the globe.

A World Tour of Cannabis Regulations

In Europe, expected regulatory reforms and growing acceptance of both medical and recreational cannabis use are contributing to a robust growth in the cannabis sector. The European market is becoming increasingly sophisticated, with a regulatory focus on consistency and compliance. We believe the European cannabis industry is on the cusp of significant transformation, driven by a wave of regulatory developments.

Countries like Germany, Malta, and Luxembourg are at various stages of legalizing or expanding legal access to cannabis, indicating a wider trend toward liberalization across the continent. Germany is currently debating the establishment of a regulated market for adult-use cannabis, which could set a precedent for other European Union countries.

Additionally, the EU’s evolving position on CBD — recognizing it as a novel food — provides a legal framework that could boost the CBD market’s growth. These regulatory changes, along with increasing public support for cannabis legalization, are poised to drive substantial growth and innovation in Europe’s cannabis industry over the next decade. With several EU countries already having legalized cannabis in some form, the region shows potential for significant market expansion, particularly as regulations evolve and export opportunities increase.

Latin America has been at the forefront of cannabis regulatory reform, with countries like Uruguay and Colombia leading the way in legalization for medical and adult use. In the coming years, Mexico may fully legalize cannabis, which would significantly impact the regional market, and potentially create one of the world’s largest legal cannabis markets. Brazil’s expanding medical cannabis program and Argentina’s recent regulations allow home cultivation and pharmacy sales for medical use. This illustrates the broader trend towards liberalization in Latin America. These developments, combined with the region’s favorable climate for cannabis cultivation, are expected to attract significant international investment and increase Latin America’s prominence in the global cannabis market.

Interest is growing in African cannabis cultivation for both local consumption and export is growing. While regulatory and infrastructural challenges hamper the market’s full potential, Africa’s cannabis industry is poised for growth, supported by regulatory advancements in countries like South Africa, Lesotho, and Zimbabwe, which have made strides in legalizing and regulating cannabis for medicinal and industrial purposes.

A landmark court ruling in South Africa in 2018 decriminalized private cannabis use, but there has been significant confusion around the rules, which exposes a need for regulatory adjustments. South Africa’s efforts to establish a legal framework for commercial cultivation and trade nevertheless underscore the region’s potential. Lesotho became a pioneer in Africa by granting licenses for medical cannabis cultivation in 2017. It was also the first country to export legal cannabis. This legacy, along with the country’s ideal growing climate, is increasingly attracting foreign investment. As more African nations reevaluate their cannabis laws to tap into the economic benefits, the continent could become a key player in the global cannabis supply chain.

Oceania has been a leader in medicinal cannabis. Australia’s progressive medical cannabis laws and recent proposals for further liberalization, including potential pathways to recreational legalization, highlight the country’s growing market. Although New Zealand did not pass a law for recreational cannabis in a recent referendum, the country continues to expand its medical cannabis program. These regulatory developments, along with ongoing research and international trade opportunities, position Oceania for significant growth and innovation in cannabis cultivation, production, and distribution.

Asia presents a complex regulatory landscape for cannabis, with countries like Thailand attempting stuttering steps towards liberalization by legalizing cannabis and removing its narcotics designation. The introduction of medical cannabis clinics and dispensaries marks Thailand’s ambition to lead in Asia’s cannabis market. However, more recently, Thailand’s new prime minister, Srettha Thavisin, has said that his government will “rectify” its cannabis policy and limit its use to medical purposes. Thailand is also considering instituting a monetary penalty on recreational users.

Meanwhile, countries like South Korea and Japan are cautiously expanding access to medical cannabis and CBD products, respectively. Alas, strict drug laws across the region remain a major barrier to development. Over the 10-year horizon, as social attitudes evolve and the economic potential of cannabis becomes increasingly recognized, regulatory reforms in select Asian countries could unlock substantial growth opportunities in the cannabis sector there.

Tile for Valuation of Cryptoassets: A Guide for Investment Professionals

The International Growth Outlook

Knowing all of this, which part of the world should a curious cannabis investor focus on? Below, we project annual growth rates for different regions based on current trends, legislative reforms, theological advancements, demographics, shifts in social attitudes, and industry reports up to April 2023.

Projected Annual Growth Rates

Region	1-Year Growth Rate	5-Year Growth Rate	10-Year Growth Rate
Europe	9% – 13%	21% – 25%	19% – 23%
Latin America	8% – 11%	19% – 23%	23% – 27%
Africa	7% – 9%	15% – 20%	20% – 24%
Oceania	10% – 15%	23% – 27%	21% – 25%
Asia	5% – 10%	13% – 17%	18% – 22%

Europe and Oceania emerge as leaders in short-term market growth potential, driven by progressive legalization movements and advanced regulatory frameworks. Latin America, Oceana, and Africa are identified as promising markets with substantial longer-term growth prospects, contingent on overcoming existing regulatory and infrastructural challenges. Asia’s complex regulatory environment produces a cautious growth outlook, albeit with notable exceptions signaling emerging opportunities.

The Opportunity

This overview provides policymakers and investors insights into the cannabis industry’s potential expansion. For investors, assessing the nuanced interplay between regulatory developments and market growth across different global regions is crucial.

With the United States accounting for 95% of the world’s cannabis sales, it understandably attracts most investor attention. However, we advise those entering the world of cannabis investment to broaden their perspectives. International markets may be small, but their growth potential creates significant opportunities. While the U.S. moves slowly through a maze of incoherent rules and self-imposed market fragmentation, other countries are adopting more coherent and comprehensive approaches, presenting lucrative international opportunities.

If you liked this post, don’t forget to subscribe to Enterprising Investor and the CFA Institute Research and Policy Center.

All posts are the opinion of the author. As such, they should not be construed as investment advice, nor do the opinions expressed necessarily reflect the views of CFA Institute or the author’s employer.

Professional Learning for CFA Institute Members

CFA Institute members are empowered to self-determine and self-report professional learning (PL) credits earned, including content on Enterprising Investor. Members can record credits easily using their online PL tracker.